Hersha Hospitality Trust (NYSE: HT) (“Hersha,” “Company,” “we” or
“our”), owner of high-quality upscale and lifestyle hotels in urban
gateway markets and resort destinations, today announced results
for the third quarter ended September 30, 2020.
Third Quarter
2020 Financial
Results
Net loss applicable to common shareholders was
approximately ($49.2 million), or ($1.27) per diluted common share,
in the third quarter 2020, compared to net loss applicable to
common shareholders of approximately ($5.4 million), or ($0.15) per
diluted common share, in the third quarter 2019. The decrease in
third quarter 2020 net income and net income per diluted common
share is due to the unprecedented impact on the travel industry
from the COVID-19 pandemic.
AFFO in the third quarter 2020 decreased to
($20.1 million), compared to $22.7 million in the third quarter
2019. AFFO per diluted common share and OP Unit in the third
quarter 2020 was ($0.46). An explanation of certain non-GAAP
financial measures used in this press release, including, among
others, AFFO, as well as reconciliations of those non-GAAP
financial measures, to GAAP net income, is included at the end of
this press release.
Mr. Jay H. Shah, Hersha’s Chief Executive
Officer, stated, “Despite precarious COVID-19 conditions, week by
week we saw an uptick in travel to our markets, specifically at our
drive-to resort assets, aided by leisure customers continuing their
planned summer vacations. Visitation to these assets remained
relatively strong through September, countering the notion that we
would see a significant contraction in leisure travel after Labor
Day. This was highlighted by our California coastal assets, The
Sanctuary Beach Resort near Monterey and The Hotel Milo in Santa
Barbara, which both produced occupancies exceeding 70% in
September. The perception in safety of travel is continuing to move
up for transient travelers as showcased by sequential improvement
in TSA security checkpoint data, which recently reached levels not
seen since mid-March. We remain encouraged by the continued
improvement in performance of our portfolio as we position our
assets for the 2021 recovery.”
Mr. Shah continued, “Since we last spoke 90 days
ago, we completed our hotel reopening plan and now have 37 of our
39 wholly-owned hotels fully operational with the two remaining
closed hotels under contract for sale. Despite the initial
remobilization cost to reopen hotels, we were able to decrease our
cash burn rate at the portfolio- and corporate-level through the
balance of the quarter. In the third-quarter we reduced our
corporate level cash burn by 32% compared to the
second-quarter. Staying nimble with our operating
models in collaboration with our independent franchise operator
enabled our safe reopening while operating our hotels
cost-effectively. This strategy, coupled with our team’s ability to
capture unique revenue opportunities, has resulted in our lower
cash burn rates and breakeven levels. As we approach the end of
this extraordinary year, we remain confident in our portfolio -
high-quality, recently renovated, transient hotels that are highly
leveraged to the recovery and located in the most valuable real
estate markets in the country.”
Third Quarter
2020 Operating
Results
The Company had 28 comparable hotels fully open
and operational throughout the third-quarter, which generated 36.8%
occupancy and an average daily rate of $165.36. The Sanctuary Beach
Resort was our best performing asset during the third quarter,
ending the period with an average daily rate of $570.17 and
occupancy of 81.1% which resulted in 15.7% RevPAR growth. Our open
New York City hotels, which constitutes the 5 boroughs, generated
40.0% occupancy during the third-quarter, highlighted by our
select-service offerings in the JFK sub-market and our Nu Hotel in
Brooklyn which ended the quarter with 54.3% occupancy.
As of November 1, 2020, 37 of the Company’s 39
wholly owned hotels are fully operational. The two remaining closed
hotels, The Duane Street Hotel and The Blue Moon Hotel, are both
under contract for sale.
Asset Sales
The Company’s 4 previously announced contracted
dispositions are expected to close in early 2021 for total net
proceeds of $70 million. In addition, the Company has entered into
an agreement to sell the 192-room Sheraton Wilmington South for a
price of $19.5 million. The sale price represents a 27.2x multiple
and a 2.1% capitalization rate on the hotel's 2019 Hotel EBITDA and
net operating income, respectively.
The Sheraton Wilmington does not have any
property-level debt and will result in net proceeds of $19.5
million. The Company has received a hard deposit on the transaction
which is expected to close in early December and is subject to
customary closing conditions.
The Company currently has an additional 5 hotels
on the market for sale.
Cash Burn and Breakeven
Levels
Monthly cash burn rates have materially improved
throughout the pandemic as property-level and corporate-level cash
burns realized a 71% and 44% decline, respectively, in September
versus initial estimates in April. The Company’s total
property-level cash loss during September was $1.7 million with
corporate-level cash loss actualizing at $5.9 million. Total
property-level cash loss during the third-quarter was $5.7 million
and total corporate-level cash loss was $18.2 million,
approximately 11% better than forecasted at the beginning of the
quarter. Based upon performance over the past two
quarters and aggressive cost control measures, the Company’s
forecasted property-level breakeven is expected to occur at 35-40%
occupancy with RevPAR losses approximating 65%. At the corporate
level, the Company’s breakeven occupancy is expected to be 55-60%
with RevPAR losses approximating 45%.
Financing
The Company completed the third quarter 2020
with approximately $20.2 million of cash & cash equivalents and
deposits. As of November 1, 2020, the Company had drawn $126
million of its $250 million Senior Revolving Line of Credit. As of
September 30, 2020, 84.0% of the Company’s consolidated debt was
fixed rate debt or hedged through interest rate swaps and caps. The
Company’s total consolidated debt had a weighted average interest
rate of approximately 3.61% and a weighted average life-to-maturity
of approximately 3.0 years.
Business Interruption
Insurance
The Company has settled its business
interruption insurance claim related to the extensive damage from
Hurricane Irma at the Cadillac Hotel & Beach Club and Parrot
Key Hotel & Villas in September 2017. The forecasted range of
recoveries is between $7 million and $8 million and the Company
expects it will receive these proceeds by the end of the year.
Full-Year
2020 Outlook
Due to the uncertainty surrounding the lodging
industry stemming from the COVID-19 pandemic, the Company has
suspended its full-year 2020 guidance.
Third Quarter
2020 Conference Call
The Company will host a conference call to
discuss these results at 9:00 AM Eastern Time on Tuesday, November
10, 2020. Hosting the call will be Mr. Jay H. Shah, Chief Executive
Officer, Mr. Neil H. Shah, President and Chief Operating Officer,
and Mr. Ashish Parikh, Chief Financial Officer.
A live audio webcast of the conference call will
be available on the Company’s website at www.hersha.com. The
conference call can be accessed by dialing 1-888-317-6003 or
1-412-317-6061 for international participants and entering the
passcode 6256442 approximately 10 minutes in advance of the call. A
replay of the call will be available from 11:00 AM Eastern Time on
Tuesday, November 10, through 11:59 PM Eastern Time on Wednesday,
December 9, 2020. The replay can be accessed by dialing
1-877-344-7529 or 1-412-317-0088 for international participants.
The passcode for the replay is 10147776. A replay of the webcast
will be available on the Company’s website for a limited time.
About Hersha
Hospitality Trust
Hersha Hospitality Trust (HT) is a self-advised
real estate investment trust in the hospitality sector, which owns
and operates high quality upscale and lifestyle hotels in urban
gateway markets and resort destinations. The Company's 49 hotels
totaling 7,774 rooms are located in New York, Washington, DC,
Boston, Philadelphia, South Florida and select markets on the West
Coast. The Company's common shares are traded on The New York Stock
Exchange under the ticker “HT.”
Non-GAAP Financial Measures
and Key Performance Metrics
Common key performance metrics utilized by the
lodging industry are occupancy, average daily rate ("ADR"), and
revenue per available room ("RevPAR"). Occupancy is calculated as
the percentage total rooms sold compared to rooms available to be
sold, while ADR measures the average rate earned per occupied room,
calculate as total room revenue divided by total rooms sold. RevPAR
is a derivative of these two metrics which shows the total room
revenue earned per room available to be sold. Management uses these
metrics in comparison to other hotels in our self-defined
competitive peer set within proximity to each of our hotel
properties.
An explanation of Funds from Operations (“FFO”),
AFFO, Earnings Before Interest, Taxes, Depreciation and
Amortization (“EBITDA”), EBITDAre, Adjusted EBITDA and Hotel
EBITDA, as well as reconciliations of such non-GAAP financial
measures to the most directly comparable U.S. GAAP measures, is
included at the end of this release.
Cautionary Statements Regarding Forward
Looking Statements
Certain matters within this press release are
discussed using “forward-looking statements,” including those with
regard to the potential future impact of COVID-19, within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, and, as such, may involve known and
unknown risks, uncertainties and other factors that may cause the
actual results or performance to differ from those projected in the
forward-looking statements. One of the most significant factors is
the ongoing impact of the current outbreak of COVID-19 on the
United States, regional and global economies, the broader financial
markets, the Company’s customers and employees, governmental
responses thereto and the operation changes the Company has and may
implement in response thereto. The current outbreak of COVID-19 has
also impacted, and is likely to continue to impact, directly or
indirectly, many of the other important factors below. These
forward-looking statements may include statements related to, among
other things: assumptions regarding the impact to international and
domestic business and leisure travel pertaining to any pandemic or
outbreak of disease, including COVID-19, the uncertainty and
economic impact of pandemics, epidemics or other public health
emergencies or fear of such events, such as the recent outbreak of
COVID-19, the impact of and changes to various government programs,
including in response to COVID-19, the timing of the development of
any effective cure or treatment for COVID-19, the Company’s access
to capital on the terms and timing the Company expects, the
restoration of public confidence in domestic and international
travel, permanent structural changes in demand for conference
centers by business and leisure clientele, the Company’s ability to
dispose of selected hotel properties on the terms and timing the
Company expects, if at all, economic growth, labor markets, real
estate values, lodging fundamentals, corporate travel, and the
economic vibrancy of our target markets, the Company’s ability to
grow operating cash flow, the Company’s ability to forecast
breakeven levels accurately, the Company’s ability to match or
outperform its competitors’ performance, the ability of the
Company’s hotels to achieve stabilized or projected revenue, cap
rates or EBITDA multiples consistent with our expectations, the
stability of the lodging industry and the markets in which the
Company’s hotel properties are located, the Company’s ability to
generate internal and external growth, and the Company’s ability to
increase margins, including hotel EBITDA margins. Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based only on the Company’s current
beliefs, expectations and assumptions regarding the future of its
business, future plans and strategies, projections, anticipated
events and trends, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict and many of which are outside of the
Company’s control. The Company’s actual results and financial
condition may differ materially from those indicated in the
forward-looking statements contained in this press release.
Therefore, you should not rely on any of these forward-looking
statements. For a description of factors that may cause the
Company’s actual results or performance to differ from its
forward-looking statements, please review the information under the
heading “Risk Factors” included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2019 and the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2020, each filed by the Company with the Securities
and Exchange Commission (“SEC”) and other documents filed by the
Company with the SEC from time to time. All information provided in
this press release, unless otherwise stated, is as of November 9,
2020, and the Company undertakes no duty to update this information
unless required by law.
|
|
|
|
|
|
HERSHA HOSPITALITY TRUST |
|
|
|
|
|
Balance Sheet (unaudited) |
|
|
|
|
|
(in
thousands, except shares and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
Assets: |
|
|
|
|
|
Investment in Hotel Properties, Net of Accumulated
Depreciation |
$ |
1,883,335 |
|
|
$ |
1,975,973 |
|
Investment in Unconsolidated Joint Ventures |
|
7,082 |
|
|
|
8,446 |
|
Cash and Cash Equivalents |
|
13,139 |
|
|
|
27,012 |
|
Escrow Deposits |
|
7,124 |
|
|
|
9,973 |
|
Hotel Accounts Receivable |
|
3,741 |
|
|
|
9,213 |
|
Due from Related Parties |
|
1,910 |
|
|
|
6,113 |
|
Intangible Assets, Net of Accumulated Amortization of $6,796 and
$6,545 |
|
1,786 |
|
|
|
2,137 |
|
Right of Use Assets |
|
44,447 |
|
|
|
45,384 |
|
Other Assets |
|
22,895 |
|
|
|
38,177 |
|
Hotel Assets Held for Sale |
|
40,195 |
|
|
|
- |
|
Total
Assets |
$ |
2,025,654 |
|
|
$ |
2,122,428 |
|
|
|
|
|
|
|
Liabilities
and Equity: |
|
|
|
|
|
Line of Credit |
$ |
115,000 |
|
|
$ |
48,000 |
|
Term Loan, Net of Unamortized Deferred Financing Costs |
|
697,836 |
|
|
|
697,183 |
|
Unsecured Notes Payable, Net of Unamortized Deferred Financing
Costs |
|
50,776 |
|
|
|
50,736 |
|
Mortgages Payable, Net of Unamortized Premium and Unamortized
Deferred Financing Costs |
|
331,409 |
|
|
|
332,280 |
|
Lease Liabilities |
|
54,042 |
|
|
|
54,548 |
|
Accounts Payable, Accrued Expenses and Other Liabilities |
|
67,000 |
|
|
|
47,626 |
|
Dividends and Distributions Payable |
|
- |
|
|
|
17,058 |
|
Total
Liabilities |
$ |
1,316,063 |
|
|
$ |
1,247,431 |
|
|
|
|
|
|
|
Redeemable
Noncontrolling Interest - Consolidated Joint Venture |
$ |
- |
|
|
$ |
3,196 |
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
Shareholders' Equity: |
|
|
|
|
|
Preferred Shares: $.01 Par Value, 29,000,000 Shares Authorized,
3,000,000 Series C, 7,701,700 Series D and 4,001,514 Series E
Shares Issued and Outstanding at September 30, 2020 and December
31, 2019, with Liquidation Preferences of $25 Per Share |
$ |
147 |
|
|
$ |
147 |
|
Common Shares: Class A, $0.01 Par Value, 104,000,000 Shares
Authorized at September 30, 2020 and December 31, 2019; 38,843,482
and 38,652,650 Shares Issued and Outstanding at September 30, 2020
and December 31, 2019, respectively |
|
389 |
|
|
|
387 |
|
Common Shares: Class B, $0.01 Par Value, 1,000,000 Shares
Authorized, None Issued and Outstanding at September 30, 2020 and
December 31, 2019 |
|
- |
|
|
|
- |
|
Accumulated Other Comprehensive (Loss) Income |
|
(22,747 |
) |
|
|
1,010 |
|
Additional Paid-in Capital |
|
1,150,057 |
|
|
|
1,144,808 |
|
Distributions in Excess of Net Income |
|
(470,582 |
) |
|
|
(338,695 |
) |
Total Shareholders' Equity |
|
657,264 |
|
|
|
807,657 |
|
|
|
|
|
|
|
Noncontrolling Interests - Common Units and LTIP Units |
|
52,327 |
|
|
|
64,144 |
|
|
|
|
|
|
|
Total Equity |
|
709,591 |
|
|
|
871,801 |
|
|
|
|
|
|
|
Total
Liabilities and Equity |
$ |
2,025,654 |
|
|
$ |
2,122,428 |
|
|
|
|
|
|
|
HERSHA HOSPITALITY TRUST |
|
|
|
|
|
|
|
|
|
|
|
Summary Results (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
(in
thousands, except shares and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months Ended |
|
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Hotel Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Room |
$ |
27,546 |
|
|
$ |
108,909 |
|
|
$ |
113,768 |
|
|
$ |
319,374 |
|
Food & Beverage |
|
2,441 |
|
|
|
15,870 |
|
|
|
12,652 |
|
|
|
48,351 |
|
Other Operating Revenues |
|
3,734 |
|
|
|
10,140 |
|
|
|
14,651 |
|
|
|
29,350 |
|
Total Hotel Operating Revenues |
|
33,721 |
|
|
|
134,919 |
|
|
|
141,071 |
|
|
|
397,075 |
|
Other Revenue |
|
25 |
|
|
|
76 |
|
|
|
253 |
|
|
|
214 |
|
Total
Revenues |
|
33,746 |
|
|
|
134,995 |
|
|
|
141,324 |
|
|
|
397,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Hotel Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Room |
|
7,436 |
|
|
|
24,000 |
|
|
|
30,150 |
|
|
|
70,103 |
|
Food & Beverage |
|
2,344 |
|
|
|
12,605 |
|
|
|
13,686 |
|
|
|
39,427 |
|
Other Operating Revenues |
|
17,965 |
|
|
|
43,476 |
|
|
|
67,806 |
|
|
|
128,273 |
|
Total Hotel Operating Expenses |
|
27,745 |
|
|
|
80,081 |
|
|
|
111,642 |
|
|
|
237,803 |
|
Hotel Ground Rent |
|
1,062 |
|
|
|
1,228 |
|
|
|
3,183 |
|
|
|
3,452 |
|
Real Estate and Personal Property Taxes and Property Insurance |
|
10,597 |
|
|
|
10,717 |
|
|
|
30,508 |
|
|
|
29,111 |
|
General and Administrative |
|
2,461 |
|
|
|
3,604 |
|
|
|
8,227 |
|
|
|
11,872 |
|
Share Based Compensation |
|
1,936 |
|
|
|
2,009 |
|
|
|
6,191 |
|
|
|
7,441 |
|
Depreciation and Amortization |
|
24,055 |
|
|
|
24,092 |
|
|
|
72,565 |
|
|
|
72,184 |
|
Loss on Impairment of Assets |
|
- |
|
|
|
- |
|
|
|
1,069 |
|
|
|
- |
|
Total
Operating Expenses |
|
67,856 |
|
|
|
121,731 |
|
|
|
233,385 |
|
|
|
361,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(Loss) Income |
|
(34,110 |
) |
|
|
13,264 |
|
|
|
(92,061 |
) |
|
|
35,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
1 |
|
|
|
66 |
|
|
|
39 |
|
|
|
207 |
|
Interest Expense |
|
(13,350 |
) |
|
|
(12,935 |
) |
|
|
(39,838 |
) |
|
|
(39,158 |
) |
Other Expense |
|
(73 |
) |
|
|
(246 |
) |
|
|
(530 |
) |
|
|
(328 |
) |
Loss on Debt Extinguishment |
|
- |
|
|
|
(231 |
) |
|
|
- |
|
|
|
(265 |
) |
Loss before
Results from Unconsolidated Joint Venture Investments and Income
Taxes |
|
(47,532 |
) |
|
|
(82 |
) |
|
|
(132,390 |
) |
|
|
(4,118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
Income from Unconsolidated Joint Venture Investments |
|
(669 |
) |
|
|
38 |
|
|
|
(2,189 |
) |
|
|
518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before
Income Taxes |
|
(48,201 |
) |
|
|
(44 |
) |
|
|
(134,579 |
) |
|
|
(3,600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
Benefit (Expense) |
|
28 |
|
|
|
551 |
|
|
|
(11,346 |
) |
|
|
1,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss)
Income |
|
(48,173 |
) |
|
|
507 |
|
|
|
(145,925 |
) |
|
|
(1,816 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss (Income) Allocated to Noncontrolling Interests |
|
|
|
|
|
|
|
|
|
|
|
Common Units |
|
5,032 |
|
|
|
442 |
|
|
|
15,093 |
|
|
|
1,554 |
|
Consolidated Joint Venture |
|
- |
|
|
|
(340 |
) |
|
|
3,196 |
|
|
|
(188 |
) |
Preferred Distributions |
|
(6,044 |
) |
|
|
(6,044 |
) |
|
|
(18,132 |
) |
|
|
(18,131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
Applicable to Common Shareholders |
$ |
(49,185 |
) |
|
$ |
(5,435 |
) |
|
$ |
(145,768 |
) |
|
$ |
(18,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
Share: |
|
|
|
|
|
|
|
|
|
|
|
BASIC |
|
|
|
|
|
|
|
|
|
|
|
Net Loss
Applicable to Common Shareholders |
$ |
(1.27 |
) |
|
$ |
(0.15 |
) |
|
$ |
(3.78 |
) |
|
$ |
(0.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED |
|
|
|
|
|
|
|
|
|
|
|
Net Loss
Applicable to Common Shareholders |
$ |
(1.27 |
) |
|
$ |
(0.15 |
) |
|
$ |
(3.78 |
) |
|
$ |
(0.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
38,639,048 |
|
|
|
38,878,818 |
|
|
|
38,604,483 |
|
|
|
39,039,665 |
|
Diluted |
|
38,639,048 |
|
|
|
38,878,818 |
|
|
|
38,604,483 |
|
|
|
39,039,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
FFO and
AFFO
The National Association of Real Estate
Investment Trusts (“NAREIT”) developed Funds from Operations
(“FFO”) as a non-GAAP financial measure of performance of an equity
REIT in order to recognize that income-producing real estate
historically has not depreciated on the basis determined under
GAAP. We calculate FFO applicable to common shares and Common Units
in accordance with the December 2018 Financial Standards White
Paper of NAREIT, which we refer to as the White Paper. The White
Paper defines FFO as net income (loss) (computed in accordance with
GAAP) excluding depreciation and amortization related to real
estate, gains and losses from the sale of certain real estate
assets, gains and losses from change in control, and impairment
write-downs of certain real estate assets and investments in
entities when the impairment is directly attributable to decreases
in the value of depreciable real estate held by an entity. Our
interpretation of the NAREIT definition is that non-controlling
interest in net income (loss) should be added back to (deducted
from) net income (loss) as part of reconciling net income (loss) to
FFO. Our FFO computation may not be comparable to FFO reported by
other REITs that do not compute FFO in accordance with the NAREIT
definition, or that interpret the NAREIT definition differently
than we do.
The GAAP measure that we believe to be most
directly comparable to FFO, net income (loss) applicable to common
shareholders, includes loss from the impairment of certain
depreciable assets, our investment in unconsolidated joint ventures
and land, depreciation and amortization expenses, gains or losses
on property sales, non-controlling interest and preferred
dividends. In computing FFO, we eliminate these items because, in
our view, they are not indicative of the results from our property
operations. We determined that the loss from the impairment of
certain depreciable assets, including investments in unconsolidated
joint ventures and land, was driven by a measurable decrease in the
fair value of certain hotel properties and other assets as
determined by our analysis of those assets in accordance with
applicable GAAP. As such, these impairments have been eliminated
from net income (loss) to determine FFO.
Hersha also presents Adjusted Funds from
Operations (AFFO), which reflects FFO in accordance with the NAREIT
definition further adjusted by:
- deducting or adding back income tax
benefit or expense;
- adding back non-cash share-based
compensation expense;
- adding back acquisition and
terminated transaction expenses;
- adding back contingent
considerations;
- adding back amortization of
discounts, premiums, and deferred financing costs;
- adding back amortization of amended
interest rate swap liability;
- adding back write-offs of deferred
financing costs on debt extinguishment, both for consolidated and
unconsolidated properties;
- adding back straight-line
amortization of ground lease expense and prior period tax
assessment expenses; and
- adding back state and local tax
expense related to prior period assessment.
FFO and AFFO do not represent cash flows from
operating activities in accordance with GAAP and should not be
considered an alternative to net income as an indication of the
Company’s performance or to cash flow as a measure of liquidity or
ability to make distributions. We consider FFO and AFFO to be
meaningful, additional measures of our operating performance
because they exclude the effects of the assumption that the value
of real estate assets diminishes predictably over time, and because
they are widely used by industry analysts as performance measures.
We evaluate our performance by reviewing AFFO, in addition to FFO,
because we believe that adjusting FFO to exclude certain recurring
and non-recurring items as described above provides useful
supplemental information regarding our ongoing operating
performance and that the presentation of AFFO, when combined with
the primary GAAP presentation of net income (loss), more completely
describes our operating performance. We show both FFO from
consolidated hotel operations and FFO from unconsolidated joint
ventures because we believe it is meaningful for the investor to
understand the relative contributions from our consolidated and
unconsolidated hotels. The display of both FFO from consolidated
hotels and FFO from unconsolidated joint ventures allows for a
detailed analysis of the operating performance of our hotel
portfolio by management and investors. We present FFO and AFFO
applicable to common shares and OP Units because our OP Units are
redeemable for common shares. We believe it is meaningful for the
investor to understand FFO and AFFO applicable to all common shares
and OP Units. In addition, based on guidance provided
by NAREIT, we have eliminated loss from the impairment of certain
depreciable assets, including investments in unconsolidated joint
ventures and land, from net (income) loss to arrive at FFO in each
year presented.
The following table reconciles FFO and AFFO for
the periods presented to the most directly comparable GAAP measure,
net income (loss) applicable to common shares, for the same
periods:
|
|
|
|
|
|
|
|
|
|
|
|
Funds from Operations (FFO) and Adjusted Funds from
Operations (AFFO) |
|
|
|
|
|
|
|
|
|
|
|
(in
thousands, except shares and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months Ended |
|
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common shares |
$ |
(49,185 |
) |
|
$ |
(5,435 |
) |
|
$ |
(145,768 |
) |
|
$ |
(18,581 |
) |
Loss allocated to noncontrolling interest |
|
(5,032 |
) |
|
|
(102 |
) |
|
|
(18,289 |
) |
|
|
(1,366 |
) |
Loss (Income) from unconsolidated joint ventures |
|
669 |
|
|
|
(38 |
) |
|
|
2,189 |
|
|
|
(518 |
) |
Loss from impairment of depreciable assets |
|
- |
|
|
|
- |
|
|
|
1,069 |
|
|
|
- |
|
Depreciation and amortization |
|
24,055 |
|
|
|
24,092 |
|
|
|
72,565 |
|
|
|
72,184 |
|
Funds from consolidated hotel operations applicable to common
shares and Partnership units |
|
(29,493 |
) |
|
|
18,517 |
|
|
|
(88,234 |
) |
|
|
51,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from unconsolidated joint venture investments |
|
(669 |
) |
|
|
38 |
|
|
|
(2,189 |
) |
|
|
518 |
|
Unrecognized pro rata interest in loss of unconsolidated joint
ventures |
|
(558 |
) |
|
|
(656 |
) |
|
|
(919 |
) |
|
|
(3,665 |
) |
Depreciation and amortization of difference between purchase price
and historical cost |
|
21 |
|
|
|
26 |
|
|
|
63 |
|
|
|
73 |
|
Interest in depreciation and amortization of unconsolidated joint
ventures |
|
415 |
|
|
|
1,305 |
|
|
|
1,210 |
|
|
|
3,879 |
|
Funds from unconsolidated joint venture operations applicable to
common shares and Partnership units |
|
(791 |
) |
|
|
713 |
|
|
|
(1,835 |
) |
|
|
805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from
Operations applicable to common shares and Partnership units |
|
(30,284 |
) |
|
|
19,230 |
|
|
|
(90,069 |
) |
|
|
52,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
(28 |
) |
|
|
(551 |
) |
|
|
11,346 |
|
|
|
(1,784 |
) |
Non-cash share based compensation expense |
|
1,936 |
|
|
|
2,009 |
|
|
|
6,191 |
|
|
|
7,441 |
|
Straight-line amortization of lease expense |
|
139 |
|
|
|
128 |
|
|
|
433 |
|
|
|
453 |
|
Amortization of discounts, premiums and deferred financing
costs |
|
916 |
|
|
|
427 |
|
|
|
1,947 |
|
|
|
1,317 |
|
Amortization of amended interest rate swap liability |
|
1,065 |
|
|
|
75 |
|
|
|
3,249 |
|
|
|
75 |
|
Deferred financing costs and debt premium written off in debt
extinguishment |
|
- |
|
|
|
231 |
|
|
|
- |
|
|
|
265 |
|
Interest in amortization and write-off of deferred financing costs
of unconsolidated joint venture |
|
33 |
|
|
|
202 |
|
|
|
51 |
|
|
|
606 |
|
Preferred Distributions in arrears |
|
6,044 |
|
|
|
- |
|
|
|
18,132 |
|
|
|
- |
|
Interest in unconsolidated joint venture write-off of prior period
receivable and accrual of prior period charges |
|
- |
|
|
|
172 |
|
|
|
- |
|
|
|
170 |
|
Operating loss incurred on properties closed |
|
- |
|
|
|
185 |
|
|
|
983 |
|
|
|
811 |
|
State and local tax expense related to reassessment of prior period
assessment |
|
42 |
|
|
|
617 |
|
|
|
15 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Funds from Operations |
$ |
(20,137 |
) |
|
$ |
22,725 |
|
|
$ |
(47,722 |
) |
|
$ |
61,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
AFFO per
Diluted Weighted Average Common Shares and Partnership Units
Outstanding |
$ |
(0.46 |
) |
|
$ |
0.53 |
|
|
$ |
(1.09 |
) |
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Weighted Average Common Shares and Partnership Units
Outstanding |
|
43,684,502 |
|
|
|
43,195,646 |
|
|
|
43,651,133 |
|
|
|
43,386,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAre and
Adjusted EBITDA
Earnings before interest expense, income taxes,
depreciation and amortization (“EBITDA”) is a supplemental measure
of our operating performance and facilitates comparisons between us
and other lodging REITs, hotel owners who are not REITs and other
capital-intensive companies. NAREIT adopted EBITDA for real estate
(“EBITDAre”) a measure calculated by adding gains from the
disposition of hotel operations, in order to promote an
industry-wide measure of REIT operating performance. We also adjust
EBITDAre for interest in amortization and write-off of deferred
financing costs of our unconsolidated joint ventures, deferred
financing costs write-offs in debt extinguishment, non-cash
share-based compensation expense, acquisition and terminated
transaction costs and net operating loss incurred on non-operation
properties to calculate Adjusted EBITDA.
Our EBITDAre and Adjusted EBITDA computation may
not be comparable to EBITDAre or Adjusted EBITDA reported by other
companies that interpret the definition of EBITDA differently than
we do. Management believes Adjusted EBITDA and EBITDAre to be
meaningful measures of a REIT's performance because they are widely
followed by industry analysts, lenders and investors and that they
should be considered along with, but not as an alternative to, GAAP
net income (loss) as a measure of the Company's operating
performance.
|
|
|
|
|
|
|
|
|
|
|
|
HERSHA HOSPITALITY TRUST |
|
|
|
|
|
|
|
|
|
|
|
EBITDAre and Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(48,173 |
) |
|
$ |
507 |
|
|
$ |
(145,925 |
) |
|
$ |
(1,816 |
) |
Loss (income) from unconsolidated joint ventures |
|
669 |
|
|
|
(38 |
) |
|
|
2,189 |
|
|
|
(518 |
) |
Interest expense |
|
13,350 |
|
|
|
12,935 |
|
|
|
39,838 |
|
|
|
39,158 |
|
Non-operating interest income |
|
(1 |
) |
|
|
(66 |
) |
|
|
(39 |
) |
|
|
(207 |
) |
Income tax (benefit) expense |
|
(28 |
) |
|
|
(551 |
) |
|
|
11,346 |
|
|
|
(1,784 |
) |
Depreciation and amortization |
|
24,055 |
|
|
|
24,092 |
|
|
|
72,565 |
|
|
|
72,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA from
consolidated hotel operations |
|
(10,128 |
) |
|
|
36,879 |
|
|
|
(20,026 |
) |
|
|
107,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from impairment of depreciable assets |
|
- |
|
|
|
- |
|
|
|
1,069 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAre
from consolidated hotel operations |
|
(10,128 |
) |
|
|
36,879 |
|
|
|
(18,957 |
) |
|
|
107,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from unconsolidated joint venture investments |
|
(669 |
) |
|
|
38 |
|
|
|
(2,189 |
) |
|
|
518 |
|
Unrecognized pro rata interest in loss of unconsolidated joint
ventures |
|
(558 |
) |
|
|
(655 |
) |
|
|
(919 |
) |
|
|
(3,664 |
) |
Depreciation and amortization of difference between purchase price
and historical cost |
|
21 |
|
|
|
26 |
|
|
|
63 |
|
|
|
73 |
|
Adjustment for interest in interest expense, depreciation and
amortization of unconsolidated joint ventures |
|
618 |
|
|
|
3,375 |
|
|
|
1,817 |
|
|
|
10,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAre
from unconsolidated joint venture operations |
|
(588 |
) |
|
|
2,784 |
|
|
|
(1,228 |
) |
|
|
7,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAre |
|
(10,716 |
) |
|
|
39,663 |
|
|
|
(20,185 |
) |
|
|
114,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share based compensation expense |
|
1,936 |
|
|
|
2,009 |
|
|
|
6,191 |
|
|
|
7,441 |
|
Straight-line amortization of lease expense |
|
139 |
|
|
|
128 |
|
|
|
433 |
|
|
|
453 |
|
Deferred financing costs and debt premium written off in debt
extinguishment |
|
- |
|
|
|
231 |
|
|
|
- |
|
|
|
265 |
|
Interest in amortization and write-off of deferred financing costs
of unconsolidated joint venture |
|
33 |
|
|
|
202 |
|
|
|
51 |
|
|
|
606 |
|
Interest in unconsolidated joint venture write-off of prior period
receivable and accrual of prior period charges |
|
- |
|
|
|
172 |
|
|
|
- |
|
|
|
170 |
|
Operating loss incurred on properties closed due to physical
damage |
|
- |
|
|
|
185 |
|
|
|
983 |
|
|
|
811 |
|
State and local tax expense related to reassessment of prior period
assessment |
|
42 |
|
|
|
617 |
|
|
|
15 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
(8,566 |
) |
|
$ |
43,207 |
|
|
$ |
(12,512 |
) |
|
$ |
123,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotel EBITDA
Hotel EBITDA is a commonly used measure of
performance in the hotel industry for a specific hotel or group of
hotels. We believe Hotel EBITDA provides a more complete
understanding of the operating results of the individual hotel or
group of hotels. We calculate Hotel EBITDA by utilizing the total
revenues generated from hotel operations less all operating
expenses, property taxes, insurance and management fees, which
calculation excludes Company expenses not specific to a hotel, such
as corporate overhead. Because Hotel EBITDA is specific to
individual hotels or groups of hotels and not to the Company as a
whole, it is not directly comparable to any GAAP measure. In
addition, our Hotel EBITDA computation may not be comparable to
Hotel EBITDA or other similar metrics reported by other companies
that interpret the definition of Hotel EBITDA differently than we
do. Management believes Hotel EBITDA to be a meaningful measure of
performance of a portfolio of hotels because it is followed by
industry analysts, lenders and investors and that it should be
considered along with, but not as an alternative to, operating
income (loss) as reported in our unaudited summary results as a
measure of our hotel portfolio’s operating performance.
|
|
|
|
|
|
|
|
|
|
|
|
HERSHA HOSPITALITY TRUST |
|
|
|
|
|
|
|
|
|
|
|
Hotel EBITDA |
|
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income |
$ |
(34,110 |
) |
|
$ |
13,264 |
|
|
$ |
(92,061 |
) |
|
$ |
35,426 |
|
Other revenue |
|
(25 |
) |
|
|
(76 |
) |
|
|
(253 |
) |
|
|
(214 |
) |
Loss from impairment of depreciable assets |
|
- |
|
|
|
- |
|
|
|
1,069 |
|
|
|
- |
|
Depreciation and amortization |
|
24,055 |
|
|
|
24,092 |
|
|
|
72,565 |
|
|
|
72,184 |
|
General and administrative |
|
2,461 |
|
|
|
3,604 |
|
|
|
8,227 |
|
|
|
11,872 |
|
Share based compensation |
|
1,936 |
|
|
|
2,009 |
|
|
|
6,191 |
|
|
|
7,441 |
|
Straight-line amortization of ground lease expense |
|
139 |
|
|
|
128 |
|
|
|
433 |
|
|
|
453 |
|
Costs accrued for furloughed employees |
|
- |
|
|
|
- |
|
|
|
893 |
|
|
|
- |
|
State and local tax expense related to reassessment of prior period
assessment |
|
42 |
|
|
|
617 |
|
|
|
15 |
|
|
|
121 |
|
Other |
|
(97 |
) |
|
|
(125 |
) |
|
|
92 |
|
|
|
(106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Hotel
EBITDA |
$ |
(5,599 |
) |
|
$ |
43,513 |
|
|
$ |
(2,829 |
) |
|
$ |
127,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Schedules
The Company has published supplemental earnings
schedules in order to provide additional disclosure and financial
information for the benefit of the Company’s stakeholders. These
can be found in the Investor Relations section and the “SEC Filings
and Presentations” page of the Company’s website,
www.hersha.com.
Contact: Ashish Parikh, Chief Financial
OfficerGreg Costa, Director of Investor RelationsPhone:
215-238-1046
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